tax tip

whelan1 · 07-03-2012 8:08pm #1

mods can move this if they want, went to a talk today by ifac and ulster bank... 1 point of interest which alot of us didnt know that might help a few people... if you buy a car with emmissions of 0-156 and spend €10000 on it- doesnt have to be new- youcan write off €24,000 in tax on it over 8 years!!!!!!!!!!!!!!!!!:eek:

Atilathehun · 07-03-2012 8:56pm

whelan1 wrote: »

mods can move this if they want, went to a talk today by ifac and ulster bank... 1 point of interest which alot of us didnt know that might help a few people... if you buy a car with emmissions of 0-156 and spend €10000 on it- doesnt have to be new- youcan write off €24,000 in tax on it over 8 years!!!!!!!!!!!!!!!!!:eek:

Could you explain a bit more in detail.

Are you saying, that you can spend €10k on a low emission car, and get €24k back in tax?????? Seems downright IMPOSSIBLE!! Do you have a link to any supporting data??

A

whelan1 · 07-03-2012 9:11pm

IFAC man explained it, maybe some of the accountants on here could put a bit of light on it... seems too good to be true

snowman707 · 07-03-2012 9:19pm

I'd say this won't be for long, they are plugging every loop hole now

Tora Bora · 07-03-2012 9:30pm

Can you imagine the headlines?
Farmer gets, €10k if taxpayers money, by way of SFP. Farmer then spends the money on a nice Toyota Yaris. He then writes the whole lot against tax, and through a tax loophole, get another €24k back in tax.

Farmer Pudsey · 07-03-2012 9:36pm

whelan1 wrote: »

mods can move this if they want, went to a talk today by ifac and ulster bank... 1 point of interest which alot of us didnt know that might help a few people... if you buy a car with emmissions of 0-156 and spend €10000 on it- doesnt have to be new- youcan write off €24,000 in tax on it over 8 years!!!!!!!!!!!!!!!!!:eek:

I have to talk to my accountant again because he would not let me do it last year

johnstown · 07-03-2012 10:02pm

As Whelan1 says, it’s a 12.5% capital allowance on qualifying cars on €24,000 over 8 years. It is a peculiar allowance though... obviously a Green initiative.

Birdnuts · 07-03-2012 10:56pm

snowman707 wrote: »

I'd say this won't be for long, they are plugging every loop hole now

Yeah - apparently car tax is about to spiral for all makes and emission standards:(

LivInt20 · 08-03-2012 12:43am

whelan1 wrote: »

mods can move this if they want, went to a talk today by ifac and ulster bank... 1 point of interest which alot of us didnt know that might help a few people... if you buy a car with emmissions of 0-156 and spend €10000 on it- doesnt have to be new- youcan write off €24,000 in tax on it over 8 years!!!!!!!!!!!!!!!!!:eek:

Not correct.

Max is €24,000. That means if you spend up to €24,000 you will get capital allowances on €24k

If you spend €10,000 you will get cap allowances on €10,000

whelan1 · 08-03-2012 6:13am

LivInt20 wrote: »

Not correct.

Max is €24,000. That means if you spend up to €24,000 you will get capital allowances on €24k

If you spend €10,000 you will get cap allowances on €10,000

ifac man was very insistent that he was correct.... i dont know alot about tax, but a few of the lads asked questions and i took the words down as he had them on the overhead projector

whelan1 · 08-03-2012 6:14am

Farmer Pudsey wrote: »

I have to talk to my accountant again because he would not let me do it last year

is he an ifac accountant?

whelan1 · 08-03-2012 6:15am

the other thing he was pushing was any family member over 16 can earn €8250 tax free, this is subject to a 2% usc

dar31 · 08-03-2012 7:20am

ive been counting down the days till mine turned of age, it used to been 14 yrs when we were kids

sister still has bad memories of painting gates and power washing, for her bit

whelan1 · 08-03-2012 8:26am

dar31 wrote: »

ive been counting down the days till mine turned of age, it used to been 14 yrs when we were kids

sister still has bad memories of painting gates and power washing, for her bit

ye , my eldest is just turning 11 , so have a while to wait

Delber · 08-03-2012 9:33am

In summary it says that cars purchases after July 2008 not in the motor tax system before 2008 then if they are in the Band A,B OR C, the capital allowance claimed for the car can be €24,000 irrespective of the cost of the car. This has been confirmed with Anthony O’Shea Revenue.

This only relates to Bands A,B and C.

D,E,F,G have totally different rules.

2. Cars purchased on or after 1st July 2008
In an effort to promote the use of cleaner low emission cars, Vehicle Registration Tax (VRT), Motor Tax and Income Tax capital allowances on cars are now linked to C02 emissions. The C02 emissions of a car replaces engine size and are graduated as one moves up the C02 bands, as follows:

C02 Emissions per Kilometre

Band A
Less than 120 grams

Band B
Between 121 and 140 grams

Band C
Between141 and 155 grams

Band D
Between 156 and 170 grams

Band E
Between 171 and 190 grams

Band F
Between 191 and 225 grams

Band G
More than 225 grams

Cars registered before 2008 (i.e.) cars in the motor tax system before 2008 continue to be taxed under the pre 2008 system related to engine size (cc).

INCOME TAX AND CORPORATION TAX CAPITAL ALLOWANCES
Categories A, B and C (emission band g/km 0-155)
For vehicles in bands A, B and C the allowable cost for capital allowances purposes is €24,000 irrespective of actual cost.

Example:

John Farmer purchases a car on 1st October 2009 with a carbon emissions level of 130g/km (a category B car) for €20,000.

John Farmer can claim capital allowances based on a cost of €24,000 even though he paid €20,000 for the car.

Categories D and E (emission band g/km 156-190)
For vehicles in bands D and E the allowable cost for capital allowances purposes is:
Where the retail price of the vehicle is less than or equal to €24,000, 50% of that price or
Where the cost is greater than €24,000, 50% of €24,000.

Example:

Mary Farmer purchases a business car on 1st December 2009 with a carbon emissions level of 160g/km (a category D car) for €36,000. Capital allowances are claimable by Mary but the amount on which the allowances are available is restricted to €12,000 i.e. 50% of €24,000.

Categories F and G (emission band g/km 190+)
For vehicles in bands F and G no capital allowances are available.

A full guide to individual motor vehicles and their CO2 emission status is available on the Society of Irish Motor Industries website at www.simi.ie

08-03-2012 2:10pm

Simply NOT true. The maximum amount on which capital allowances can be claimed is €24,000. If the car cost €30k then you can only claim on €24k. If is cost €15k you can claim on €15k. There is a ceiling of €24k.

It is even on IFAC's website:
http://www.ifac.ie/ifac_taxation3.htm

Beware of people on here who purport to speak the gospel with no documentary evidence. Who is Anthony O'Shea in Revenue anyway. Wrong is what he is!

Also the capital allowances that can be claimed on passenger vehicles are reduced to reflect only the business use of the car. Usually only 2/3rds of the capital allowances on cars can be used to account for personal use.

whelan1 · 08-03-2012 2:15pm

surely an ifac rep is not going to stand up in front of 20 odd people and tell us lies!

BeeDI · 08-03-2012 2:51pm

whelan1 wrote: »

surely an ifac rep is not going to stand up in front of 20 odd people and tell us lies!

I'm sure he would not. However, it defies all logic, as to how you could be allowed to claim a tax break, on €24k, when in theory, you could only have to spend €1, according to the logic as you explain it!!

For example I could but a crashed and wrecked band B car for scrap value of say €1k and promptly claim capital allowance on €24k:D:D

Now the Greens, and the FF'rs, went plain fckuing mad, when in power, BUT even for them, that would be a step too far, I'd imagine:cool:

locha · 08-03-2012 2:52pm

Can you get capital allowances on your car?? Have people experience of their accountants letting them do this?
Thought it has to be used wholly and exclusively for the pursposes of the trade.

barneystinson · 08-03-2012 3:08pm

locha wrote: »

Can you get capital allowances on your car?? Have people experience of their accountants letting them do this?
Thought it has to be used wholly and exclusively for the pursposes of the trade.

You can claim capital allowances on any plant & machinery used in a trade, in proportion to the extent that they've been wholly and exclusively so used.

Normally the mileage is the yardstick used to apportion usage. So, if you buy a family car and it does 15k miles per annum, you'd need to be able to stand over the proportion of that 15k miles that relates to trips wholly and exclusively for the purpose of farm business.

BeeDI · 08-03-2012 3:19pm

barneystinson wrote: »

You can claim capital allowances on any plant & machinery used in a trade, in proportion to the extent that they've been wholly and exclusively so used.

Normally the mileage is the yardstick used to apportion usage. So, if you buy a family car and it does 15k miles per annum, you'd need to be able to stand over the proportion of that 15k miles that relates to trips wholly and exclusively for the purpose of farm business.

Not alone that, but you can also set off the proportion of annual running costs which relates to the farm. Fuel, servicing, tyres, insurance, etc!

Full time farmer would usually claim two thirds of all cost both capital and running costs.

As a part time farmer, I use one third to set against farm expenses.

KCTK · 08-03-2012 3:54pm

6600 wrote: »

Simply NOT true. The maximum amount on which capital allowances can be claimed is €24,000. If the car cost €30k then you can only claim on €24k. If is cost €15k you can claim on €15k. There is a ceiling of €24k.

It is even on IFAC's website:
http://www.ifac.ie/ifac_taxation3.htm

Beware of people on here who purport to speak the gospel with no documentary evidence. Who is Anthony O'Shea in Revenue anyway. Wrong is what he is!

Also the capital allowances that can be claimed on passenger vehicles are reduced to reflect only the business use of the car. Usually only 2/3rds of the capital allowances on cars can be used to account for personal use.

Hi 6600, think you should read the link above in more detail again, under the section on Cars purchased after 2008 it clearly states,
INCOME TAX AND CORPORATION TAX CAPITAL ALLOWANCES

Categories A, B and C (emission band g/km 0-155)

For vehicles in bands A, B and C the allowable cost for capital allowances purposes is €24,000 irrespective of actual cost.

If you buy say a band A 2009 car for €10k then as Whelan1 has said you can claim capital allowance on a cost of €24k (subject to personal use restriction as you have mentioned above). I am a Chatered Accountant and Tax Advisor and deal with this every day so I can guarantee you it is fact.

Tipp Man · 08-03-2012 4:03pm

6600 wrote: »

Simply NOT true. The maximum amount on which capital allowances can be claimed is €24,000. If the car cost €30k then you can only claim on €24k. If is cost €15k you can claim on €15k. There is a ceiling of €24k.

It is even on IFAC's website:
http://www.ifac.ie/ifac_taxation3.htm

Beware of people on here who purport to speak the gospel with no documentary evidence. Who is Anthony O'Shea in Revenue anyway. Wrong is what he is!

Also the capital allowances that can be claimed on passenger vehicles are reduced to reflect only the business use of the car. Usually only 2/3rds of the capital allowances on cars can be used to account for personal use.

How can you say "Simply NOT true" in capitals without being 100% on what you are saying??

Did you actually read the IFAC website you quoted??

Here's a line from it

INCOME TAX AND CORPORATION TAX CAPITAL ALLOWANCES

Categories A, B and C (emission band g/km 0-155)

For vehicles in bands A, B and C the allowable cost for capital allowances purposes is €24,000 irrespective of actual cost.
Example:John Farmer purchases a car on 1st October 2009 with a carbon emissions level of 130g/km (a category B car) for €20,000.John Farmer can claim capital allowances based on a cost of €24,000 even though he paid €20,000 for the car.

I then went here to check out if it is correct
www.revenue.ie/en/tax/it/.../claim-car-expenses-capital-allowances.pd...

Revenue had the following to say on that download:

Allowable Wear &

Tear

Allowed, subject to a limit of

€24,000 regardless of the cost

of the car

I think that says all we need to know - thats why people pay accountants

whelan1 · 08-03-2012 4:09pm

thanks for that tippman and everyone else... hopefully we can avail of it:)

Mongarra · 08-03-2012 4:24pm

For any technical heads the reference is TCA 97 S380L (inserted by Finance Act 2008), and it does allow for €24,000 to be claimed even though the cost may be less. However, in reply to an earlier post about purchasing a wrecked, scrapped vehicle, this could not be used for the purposes of a trade so no claim could arise.

Also, the allowance is not just for farmers, but for anyone using a qualifying vehicle for their trade.

locha · 08-03-2012 4:29pm

Question I will be asking my accountant:

Does the car have to be new or can it be secondhand?? Reason I ask is that if it is secondhand I can go out buy a qualifying 2008 car in the A/B/C band (as cheap as I can) use it till the end of my tax year and if I wanted therotically scrap it and get a balancing allowance for the unclaimed allowances up of up to 24k..

One further question - if you are claiming 50% of the car to write off against the farm does that mean that you can claim allowances of 12k (i.e. 24*50%)

pakalasa · 08-03-2012 4:40pm

You can't claim back 24,000 Euro in tax. That's crazy. This is like buying a tractor and thinking you can claim it back in tax.
Looking at the IFAC website, in effect what you are doing is claiming 2,000 Euro a year as an expense on the farm. So for tax purposes your profit goes down by 2,000 Euro. If you are in the lower tax band of 20% then you're paying tax on 2,000 les so, that's 2,000 X 20% = 800 Euro.
So that's what you save, 800 Euro each year for 8 years. 6,400 Euro in total. It might be cheaper buy a second hand car.......:D

If you're in the 41% tax, then you save twice that amount...The rich get richer etc..

08-03-2012 4:54pm

Ok so I read it again TippMan, the wording is "subject to a limit of €24k, regardless of the cost."

So it means exactly what it did when I first read it and you still cannot claim capital allowances on €24k even if the car only cost €1k.

Would also remind you that you cannot claim the full capital allowances on a car if you are not using it wholly and exclusively for the purposes of the trade. Usually a farmer can claim 2/3 of the capital allowances and the running costs.

Also Whelan you say that you find it hard to believe an IFAC accountant would stand in front of you and say that. How many IFAC accountants are actually qualified accountants?

barneystinson · 08-03-2012 5:24pm

6600 wrote: »

Ok so I read it again TippMan, the wording is "subject to a limit of €24k, regardless of the cost."

So it means exactly what it did when I first read it and you still cannot claim capital allowances on €24k even if the car only cost €1k.

Would also remind you that you cannot claim the full capital allowances on a car if you are not using it wholly and exclusively for the purposes of the trade. Usually a farmer can claim 2/3 of the capital allowances and the running costs.

Also Whelan you say that you find it hard to believe an IFAC accountant would stand in front of you and say that. How many IFAC accountants are actually qualified accountants?

Taken from the Guidance Notes to TCA97 as published on the Revenue website (http://www.revenue.ie/en/practitioner/law/notes-for-guidance/tca/part11c.pdf page 3, under Section 380L):

The actual cost of the car for the purposes of the wear and tear allowance is modified in the following way:

• cars in category A, B or C, €24,000,
• cars in category D or E, the lesser of €12,000 or half the cost of the car, and
• cars in category F or G, zero.

Tipp Man · 08-03-2012 5:26pm

6600 wrote: »

Ok so I read it again TippMan, the wording is "subject to a limit of €24k, regardless of the cost."

So it means exactly what it did when I first read it and you still cannot claim capital allowances on €24k even if the car only cost €1k.

Would also remind you that you cannot claim the full capital allowances on a car if you are not using it wholly and exclusively for the purposes of the trade. Usually a farmer can claim 2/3 of the capital allowances and the running costs.

Also Whelan you say that you find it hard to believe an IFAC accountant would stand in front of you and say that. How many IFAC accountants are actually qualified accountants?

In your original post you said

6600 wrote: »

Simply NOT true. The maximum amount on which capital allowances can be claimed is €24,000. If the car cost €30k then you can only claim on €24k. If is cost €15k you can claim on €15k. There is a ceiling of €24k.

This is wrong - If you buy a qualifying car for 15k then you can claim wear and tear allowances of 24k. If you buy a qualifying car of 30k then your wear and tear allowances are still 24k

Nobody is disputing that it need to be split for private/business use

barneystinson · 08-03-2012 5:30pm

pakalasa wrote: »

You can't claim back 24,000 Euro in tax. That's crazy. This is like buying a tractor and thinking you can claim it back in tax.
Looking at the IFAC website, in effect what you are doing is claiming 2,000 Euro a year as an expense on the farm. So for tax purposes your profit goes down by 2,000 Euro. If you are in the top tax band of 41% then you paying 2,000 less in the 41%.
So that's 2,000 X (41%-20%) = 420 Euro.
So that's what you save, 420 Euro each year for 8 years. 3,360 Euro in total. It might be cheaper buy a second hand car.......:D

Not quite correct. You are paying tax on €2,000 less income, at your marginal rate i.e. your highest rate of tax.

Say your income was €40,000: €32,400 would be taxed at 20%, the remaining €7,600 taxed at 41%. Total tax of €9,596 (before tax credits).

Now say you claim a capital allowance of €2,000. Your income becomes €38,000. The same amount is taxed at 20%. The remainder is now only €5,600 to be taxed at 41%. Total tax is now €8,776.

The difference between the two is €820, which is €2,000 @ 41%.

Tipp Man · 08-03-2012 5:31pm

pakalasa wrote: »

You can't claim back 24,000 Euro in tax. That's crazy. This is like buying a tractor and thinking you can claim it back in tax.
Looking at the IFAC website, in effect what you are doing is claiming 2,000 Euro a year as an expense on the farm. So for tax purposes your profit goes down by 2,000 Euro. If you are in the top tax band of 41% then you paying 2,000 less in the 41%.
So that's 2,000 X (41%-20%) = 420 Euro.
So that's what you save, 420 Euro each year for 8 years. 3,360 Euro in total. It might be cheaper buy a second hand car.......:D

I don't think anybody is saying you can claim back 24k in tax;)

The dispute is over how much wear and tear expense you can claim

Using the 24k over 8 years your taxable profit is reduced by 3k every year @41% is a maximum saving of €1,230 annually for 8 years (assuming you are taxed @ 41%, you would also need to adjust for the personal use allowance)

barneystinson · 08-03-2012 5:36pm

locha wrote: »

Question I will be asking my accountant:

Does the car have to be new or can it be secondhand?? Reason I ask is that if it is secondhand I can go out buy a qualifying 2008 car in the A/B/C band (as cheap as I can) use it till the end of my tax year and if I wanted therotically scrap it and get a balancing allowance for the unclaimed allowances up of up to 24k..

What do you mean by theoretically scrap it?!

Timmaay · 08-03-2012 7:42pm

barneystinson wrote: »

What do you mean by theoretically scrap it?!

Sell it for cash, and tell the taxman that you had to scrap it and gave it away for nothing. Which is of course tax evasion, who would dream of doing something as such!

barneystinson · 08-03-2012 10:34pm

Timmaay wrote: »

Sell it for cash, and tell the taxman that you had to scrap it and gave it away for nothing. Which is of course tax evasion, who would dream of doing something as such!

Not to mention a stupid and certain to get caught type of tax evasion, for several reasons.
Such as Revenue will be able to see that the car is still on the road. And their risk systems will red flag the large balancing allowance claim.

keep going · 08-03-2012 11:52pm

a question for yer heads is if you have a jeep as well can you claim capital allowances for the car and if the car is in your wifes name who works off the farm,will it make a difference. it would be handy for us as we bought a b class car last year for 10200 including vrt,could save us 300+ in tax

bob charles · 09-03-2012 12:43am

what a ridiculous tax avoidance scheme but I will do my best to avail of it. Now im about to trade into a commercial Golf or similar which is to be used wholly and soley for farm use by employee, say spend 10k for something second hand. What you boys are saying Im allowed to right off 3k against my profits for the next 8 yrs (why 8 years).

Considering its a business vehicle I be putting it as a farm expense over 5 years anyway on the farm accounts so whats the difference. Im confused, best I lye down for awhile

Re insurance for commercial type cars, are people able to get them insured as commercial vehiles or are they paying the same as if they were a car

corkcomp · 09-03-2012 8:40am

bob charles wrote: »

what a ridiculous tax avoidance scheme but I will do my best to avail of it. Now im about to trade into a commercial Golf or similar which is to be used wholly and soley for farm use by employee, say spend 10k for something second hand. What you boys are saying Im allowed to right off 3k against my profits for the next 8 yrs (why 8 years).

Considering its a business vehicle I be putting it as a farm expense over 5 years anyway on the farm accounts so whats the difference. Im confused, best I lye down for awhile

Re insurance for commercial type cars, are people able to get them insured as commercial vehiles or are they paying the same as if they were a car

if you mean car derived vans (like 307 / golf etc) I've had them insured both ways, either class 2 /3 car insurance or full commercial like a jeep, it basically depends on the Ins company you go with. 12.5% per anum over 8 years is the standard time to write off a capital asset (it used to be 5 years a good while back), there are exceptions and if the life of the asset is les than 8 years you can write off the remainder when the asset is scrapped etc.

KCTK · 09-03-2012 9:59am

locha wrote: »

Question I will be asking my accountant:

Does the car have to be new or can it be secondhand?? Reason I ask is that if it is secondhand I can go out buy a qualifying 2008 car in the A/B/C band (as cheap as I can) use it till the end of my tax year and if I wanted therotically scrap it and get a balancing allowance for the unclaimed allowances up of up to 24k..
QUOTE]

Locha whatever about the fact of trying this being tax evasion I am afraid you will not get a balancing allowance for the unclaimed amount up to the €24k. The Revenue are a little smarter than allowing such a loophole so there is a calculation which need to be performed when looking at any balancing allowance available, what they do is gross up the proceed of the sale by the fraction your original cost was less than the €24k. The below is a worked example of this calculation from a tax manual;

Derek purchases a business car on 1 August 2011 with a carbon emissions level of 130g/km (Cat .The cost price is €12,000.Capital allowances are available to Derek and the amount on which allowances are available is increased to €24,000, rather than the actual cost price of €12,000.If the car is subsequently disposed of for €6,000 a few years later, any calculation of a balancing allowance/charge on disposal will be calculated by comparing the TWDV with the proceeds as adjusted.In this example the adjusted proceeds to be used are:
€6,000 X €24,000/€12,000 = €12,000

Grecco · 30-01-2013 6:23pm

tax tip

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